Bills Digest no. 1 2011–12
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WARNING: This Digest was prepared for debate. It reflects the legislation as introduced and does not canvass subsequent amendments. This Digest does not have any official legal status. Other sources should be consulted to determine the subsequent official status of the Bill.
Bills Digest Service
5 July 2011
25 May 2011
House of Representatives
Resources and Energy
Sections 1–3 on the day of Royal Assent; Schedule 1 on the later of the start of the day after the day of Royal Assent, and the registration commencement time within the meaning of the Personal Property Securities Act 2009
Links: The links to the Bill, its Explanatory Memorandum and second reading speech can be found on the Bill's home page, or through http://www.aph.gov.au/bills/. When Bills have been passed and have received Royal Assent, they become Acts, which can be found at the ComLaw website at http://www.comlaw.gov.au/.
The purpose of the Offshore Resources Legislation Amendment (Personal Property Securities) Bill 2011 (the Bill) is to amend the Offshore Petroleum and Greenhouse Gas Storage Act 2006 (OPGGS Act) and the Offshore Minerals Act 1994 (OMA) to provide that the rights, licences, permits, leases and authorities registrable under those Acts shall not constitute personal property securities that would be registrable under the Personal Property Securities Act 2009 (PPS Act).
The Bill is one of a suite of five complementary Bills relating to offshore petroleum and greenhouse gas activities that were introduced into the Parliament on 25 May 2011. The principal Bill in the package is the Offshore Petroleum and Greenhouse Gas Storage Amendment (National Regulator) Bill 2011 (National Regulator Bill). Further information and analysis about the nature of the changes is contained in the Bills Digest for the principal Bill.
The OPGGS Act provides a regulatory framework for Australia’s offshore petroleum exploration and recovery and for the injection and storage of greenhouse gas substances in offshore areas.
Under the OPGGS Act, the Joint Authority may grant a range of titles with respect to petroleum and greenhouse gas substances. Although the National Regulator Bill will make a number of changes to the regulation of offshore petroleum and greenhouse gas titles, it will not affect the role of the Joint Authority in this respect.
Chapter 4 of the OPGGS Act (Registration of transfers of, and dealings in, petroleum titles) presently requires the Designated Authority to keep a register of offshore petroleum titles and petroleum special prospecting authorities. The Designated Authority must also approve or refuse to approve transfers of, or dealings in, petroleum titles. Approvals must be recorded by the Designated Authority in the Register. In the event that the National Regulator Bill is approved, the primary responsibility for registrations will rest with a new entity, the National Offshore Petroleum Authority.
Where the title is a ‘referable title’, the Designated Authority must not make a decision before referring the proposed transfer or dealing to the responsible Commonwealth Minister. The Designated Authority must then act on any direction from the Minister concerning the proposed transfer or dealing.
Chapter 5 of the OPGGS Act (Registration of transfers of, and dealings in, greenhouse gas titles) requires the responsible Commonwealth Minister to maintain a register of greenhouse gas titles and greenhouse gas search authorities. The Minister may either approve or refuse to approve a proposed transfer or dealing in a greenhouse gas title. If approved, the approval must be entered in the Register.
The OMA provides a regulatory framework for the exploration and mining of Australia’s offshore mineral resources. Offshore mining licences may be granted by the Joint Authority.
Chapter 3 of the OMA (Registration and dealings) provides for the registration by the Designated Authority of mining licences (including renewals and extensions of licences) and transfers, and other dealings in, devolutions of, and caveats on mining licences.
The Designated Authority under the OMA appears to have less discretion with respect to registration than the Authority under the OPGGS Act. For instance, the OMA Authority cannot register the transfer of a licence unless the transfer has been approved by the Joint Authority, and with respect to ‘other dealings’, the Authority is required to register relevant documents ‘without inquiring into or concerning itself with their legal effectiveness’.
The PPS Act establishes a single national law governing security interests in personal property. It is anticipated that this will result in more certain, consistent, simpler and cheaper arrangements for personal property securities. As part of this Australia-wide approach, the Act establishes a single national online personal property securities register (PPS Register).
The PPS Act and the national PPS Register are scheduled to commence in October 2011. The PPS Register will be the primary register of personal property security interests throughout Australia.
Personal property is any property other than land and buildings. It includes tangibles (goods such as machinery, crops and livestock), financial property such as currency and letters of credit and intangibles (such as insurance policies, patents, trademarks and choses in action).
Titles to petroleum, greenhouse gas substances and minerals under the OPGGS Act and the OMA would be personal property for the purposes of the PPS Act.
A personal property security is an interest in personal property that secures a payment or the performance of an obligation. There are very few restrictions on what type of personal property can be used as security—almost anything of value may be acceptable as security if the lender and borrower agree.
As they are both Commonwealth enactments, the requirements of the OPGGS Act and the OMA would not be overridden by those of the PPS Act. It therefore follows that, as well as being registrable under the OPGGS Act or the OMA, securities acquired in petroleum, greenhouse gas and mining titles would also be registrable as personal property securities under the PPS Act.
The Explanatory Memorandum to the Bill states that, to avoid duplication and confusion, it is Commonwealth policy that existing approval and registration requirements under another Commonwealth Act are either:
- removed from the Commonwealth Act so that the provisions of the PPS Act only apply, or
- the application of the PPS Act to the Commonwealth Act is expressly excluded.
The Bill proposes the adoption of the second of these options. The Explanatory Memorandum further indicates that this would be consistent with a policy decision made by the Government to expressly exclude from the application of the PPS Act, the OPGGS Act and the OMA.
The Explanatory Memorandum also indicates that, in consultations, the States and the Northern Territory have advised the Government that they intend ‘to opt out of or exclude the operation of the PPS Act to their onshore mining regimes’. The consequences of this are considered in more detail in the ‘Main issue’ section of this Bills Digest.
Paragraph 8(1)(k) of the PPS Act gives the Commonwealth, the States or the Northern Territory the right to declare a statutory right not to be personal property for the purposes of the PPS Act. The terms of this Bill are consistent with that right.
On 25 May 2011, the suite of Bills was referred to the House of Representatives Standing Committee on Agriculture, Resources, Fisheries and Forestry (the House of Representatives Committee) for inquiry and report. The House of Representatives Committee has now finalised its report, indicating its support for the passage of the Bills.
The Bills were also referred to the Senate Economics Legislation Committee (Senate Committee) for inquiry and report. The Senate Committee has now reported, also recommending passage of the Bills.
According to the Explanatory Memorandum, the Bill will have no financial implications.
The main issue raised by the Bill is whether the registration of transfers and other dealings in petroleum, greenhouse gases and mining titles should continue to occur under the OPGGS Act and the OMA, or whether these titles should be registrable as personal property securities under the PPS Act.
If this Bill were not passed prior to the commencement of the PPS Act, these titles would be registrable under the OPGGS Act and the OMA in accordance with the current law but there would be an additional requirement to register them under the PPS Act. This would clearly be undesirable because it would have a duplicating effect.
There are sound reasons for exempting the registration of transfers and other dealings in petroleum, greenhouse gases and mining titles from the operation of the PPS Act. First, the Government has been advised by the States and the Northern Territory that, in any event, they intend to opt out of, or to exclude the application of, the PPS Act to their onshore mining schemes.
Second, by excluding the application of the PPS Act to the OPGGS Act and the OMA, inconsistency between offshore and onshore mining, and the potential cost of any such inconsistency to the mining industry and its investors, would be avoided.
Third, and more significantly in terms of the Commonwealth offshore regulatory regime, under the registration requirements in the OPGGS Act, the regulator (currently the Designated Authority) and the Commonwealth Minister have certain powers of refusal. For instance, the Designated Authority has the ability to refuse to approve a transfer or dealing in relation to a petroleum title, and the responsible Commonwealth Minister has the ability to refuse to approve a transfer or dealing in relation to a greenhouse gas title. In addition, if, in the case of a transfer or a dealing in a petroleum title, if the title is a ‘referable title’, the responsible Commonwealth Minister can issue a direction to the Designated Authority in relation to the exercise of the Designated Authority's power to approve or refuse to approve a dealing in relation to the petroleum title. The direction must be complied with. These powers enable the Australian Government ‘to ensure the suitability of the entities that potentially are able to exercise control over Australia’s offshore petroleum resources’. There is no corresponding power of refusal in the PPS Act.
In its submission to the House of Representatives Committee, the Department of Energy, Resources and Tourism states that under the reforms proposed in the National Regulator Bill
This important oversight/vetting role will be exercised by the Titles Administrator to continue to meet the Australian Government's objective of ensuring the suitability of entities that potentially are able to exercise control over Australia's offshore petroleum and greenhouse gas storage resources.
Item 1 of the Schedule to the Bill amends the OMA by inserting proposed section 439A which declares that a licence or an interest or right in, or in relation to a mining title licence is not personal property for the purposes of the PPS Act.
Item 2 inserts proposed Part 9.10B—Personal Property Securities, and proposed section 780 H after existing Part 9.10A of the OPGSS Act. Paragraphs (a)–(o) of proposed section 780H list the items that the section declares are not to be personal property for the purposes of the PPS Act.
Each of the proposed provisions has below it a note referring to paragraph 8(1)(k) of the PPS Act. As previously mentioned, this provision gives the Commonwealth, the States or the Northern Territory the option of declaring a statutory right not to be personal property for the purposes of the PPS Act.
The reasons given by the Government for the amendments to the OPGGS Act and the OMA proposed by the Bill appear to be sound.
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